Notice & Comment

D.C. Circuit Review – Reviewed: En Banc Oral Argument (Part II)

Last week’s post discussed the Court’s en banc oral argument in PHH Corp. v. CFPB. This week’s post will discuss the other hugely important administrative law case pending before the en banc Court: Raymond J. Lucia Companies, Inc. v. SEC. The format will be the same — as will be the caveats. Again, I do not have a perfect transcript. (If you want perfection, contact the Court.) Here is the audio.

The panel decision in Raymond J. Lucia Companies is part of a circuit split. The question is whether the SEC’s Administrative Law Judges are “officers” for purposes of the Appointments Clause. The D.C. Circuit’s panel decision says no; the Tenth Circuit’s decision says yes. (The Tenth Circuit is not taking its decision en banc so there is a very good chance that this issue comes before the Supreme Court no matter what the en banc D.C. Circuit says.)

With that background, here are some of the interesting statements and questions from the Raymond J. Lucia Companies argument.

First, consider the argument of Mark Perry:

Court: Don’t we assume regularity on the part of government employees. If my clerks’ draft is going to go out over my signature, I could choose not to review it. But, I would be failing in my duty if I did that. And here, the opinions are going out as the opinions of the Commission and you refer to, you know, that they don’t have to review them, but the statute actually makes them the Commission’s decision. So, I would assume that the Commission is in fact reviewing all of them.

Counsel: Judge Pillard, that’s not correct, factually or legally. First, the ALJ decisions, unlike your law clerks, go out over the ALJ’s name. They’re required by regulation to be published on the SEC’s docket as the ALJ’s decision. Law Clerks, secretaries, file clerks, gardeners, do not publish decisions of the United States in their own name on the SEC’s docket or the other agency. Legally, the Commission may review, but it does not review. And … there is nothing submitted by the Commission that says they do review. They may review, but they do not. And 90% of the ALJ decisions rendered in this agency are never reviewed.

This too:

Court: The Commission doesn’t ever re-do the trial and hear the witnesses does it?

Counsel: The Commission has the authority to do that. It has never done that in my knowledge since the Exchange Act was adopted in 1934.

Court: The credibility of the witnesses is assessed solely by the administrative law judge?

Counsel: Judge Kavanaugh, in fact in this case … the Commission remanded the administrative law judge stressing the “vital role” that the administrative law judge plays in shaping the record and saying that the Commission’s review is “no substitute for the law judges assessment of witness credibility, demeanor and so forth,” and the Commission gives great deference, in fact near total deference. I’m not aware of any Commission decision that has ever overturned [an ALJ] determination, a factual finding, based on credibility.

This also is noteworthy:

Court: … I think you said in your brief, we can confine a decision to just the SEC ALJs and it wouldn’t affect the thousands of other ALJs who work for independent agencies. Is that right?

Counsel: Judge Tatel, the question this case….

Court: How would that be?

Counsel: Your Honor, first, this is a petition for review, so the only question before the court is the SEC ALJs. I understand…

Court: I understand that, that’s why I asked you the question, about the implications for other ALJs

Counsel: So…

Court: When we issue an opinion that states a principle about whether these ALJs are inferior officers, we need to think about whether or not that affects every ALJ that works for an independent agency …

Counsel: As best we can tell, and I’ll let Mr. Stern give the government’s view, there are 142 ALJs in the federal system that conduct adversarial enforcement proceedings subject to 556 and 557 of the APA. 142 ALJs in 24 agencies. The government hasn’t put that information on record. We have done that in our research, there’s nothing in the record. And again, this is a petition for review I want to be careful about not going outside the record without telling you that’s what I’m doing. But as best we can tell there are 142 judges that would be affected. The other judges, the vast majority of them are social security judges. The government, the United States Justice Department takes the position … that those judges are engaged in the dolling out of government largess rather than executing enforcement powers on behalf of the president, makes all the difference. I don’t know if that’s true or not, but the government has taken that position, and for present purposes it seems to me that it’s at least an arguable distinction. We tried to find in response to your concern, your honor, the number of judges that are actually like SEC ALJs and I believe that number is 142.

And this:

Court: Mr. Perry, you refer several times in your brief to this ALJ system as creating a “pet court” of the SCC and have it, allowing the SCC to litigate on its home port. But, it seems like the remedy that you would be seeking here, which is to make the SEC ALJs more directly politically accountable to the head of the agency would run in exactly the opposite direction from a cure for the what you call “pet status” of this court.

Counsel: Judge Pillard, the appointments clause is about accountability and transparency not independence. And it’s important for the public for respondents and enforcement proceedings for the commission itself and for this court, which reviews more of these cases than any other judicial body to understand the line of authority that runs from the commissioner to the ALJ.

This too:

Court: … Mr. Perry, the question I have for you is what is the power that these ALJ’s have to bind third parties or the government itself? And that’s the phrase from the … OLC opinion. What makes someone an officer is the authority to bind third parties or the government itself. What authority do these ALJ’s have to do either of those things?

Counsel: So one simple example, they can issue subpoenas which compel attendance of witnesses, third party witnesses, government witnesses, party witnesses, with consequences of non-appearance. They issue oaths and affirmations.

Court: People don’t show up and there’s no consequence.

Counsel: That’s not correct your honor. If it’s a party, you get a default judgment issued against you.

Court: And if the default judgment is issued against you and you have to go to the Commission to make that effective.

Counsel: Right, and the Commission is not going to reverse that because you violated the rules.

The Court had tricky questions for Mark Stern as well — representing the SEC:

Court: But the Commission never does the trial. The Commission never makes the credibility judgments that are critical in a trial. But the Commission never makes the evidentiary rulings that are critical to the outcome of the trial. Credibility and evidentiary rulings are essential on any fact finding situation and the Commissions does not do that, the judge does that.

Counsel: I mean the Commission specifically in its discussion in this case … the Commission talks about what it actually does.

Court: Does it ever hear live witnesses? Has it ever?

Counsel: I don’t know the answer to that.

Court: I think the answer is no, and that is an obvious division of authority that makes sense in terms of commission practice, why would it redo the whole trial? But it also, underscores my concern about this case.

This too:

Court: … what is that principle that’s being articulated here, because we get all down in the weeds with the specific things that the judges or the ALJs can do, but the real question is, we’re trying to figure out, how do we decide whether what they’re doing is significant, and you seem to be saying it doesn’t really matter what they do, how much authority they have, they run trials, they do all of this, but in the end, it’s the Commission that has the final say, so it’s almost—I guess my question is, can you articulate then what is the principle? Let’s assume that they could do everything that an Article III judge could do, but the Commission would have the final say, so would your argument be, then, their activities are not significant?

Counsel: I mean, I would have to see what that statute looked like. I mean, if it was really everything an Article III judge could do subject to review, I mean, if in effect—I mean, if a statute were essentially to recreate a sort of judicial framework. I mean, I’m sorry Judge Brown.

Court: I’m not trying to put this into the judicial framework, I’m just trying to get at what is the definition, then, for you of significance, because if, let’s say they have enormous powers, incredible discretion, but at the end of the day, it still has to be signed off in some way by the Commission, then is your argument then their actions can’t be significant? Because that seems like a finality argument.

Counsel: No, it’s not a finality argument in the same sense, I think. I mean, there are a lot of people in the government who exercise very extensive authority, and they do it pursuant often to informal delegations. A chief of staff of an officer may be told, sort of, “I want you to go out, and I want these two parties who’ve got conflicting views to come to you, and I want you guys to try and reach a resolution of the matter. If you can reach one, that’s great. If you can’t, I’m going to have to decide it.” The chief of staff doesn’t thereby become an officer. Nobody’s saying he’s not really important.

Court: So if you’re recognizing that finality is not the principle, what is the principle? How do we determine what is significant activity that makes someone an officer?

Counsel: I wish I had a bright line rule. I don’t have one.

Here is another:

Court: But the appointments clause is not so limited. The language of the appointments clause is speaking in terms of officers, and to go back to Judge Brown’s point, I’d like you to go back to a higher level of generality. What is the principle that we are supposed to follow to determine if it’s not finality, to determine whether someone is an officer?

Counsel: Well, one of them is, I think—

Court: Isn’t that the inquiry? We ought to ask that first, and then see if the SCC ALJs fit under that rubric. So what’s the principle?

Counsel: The principle, I think, I mean, one of the principles is that which Judge Pillard cited from the 2007 OLC opinion about binding the ability to bind the government to third parties, and, you know, exercising significant proper authorities.

And this:

Court: Mr. Stern, I asked Mr. Perry about the consequences of us ruling that the SCC ALJs are inferior officers, and he said that there are about 120 equivalent ALJs in other regulatory agencies. Do you think that that’s about right?

Counsel: I don’t know how that figure was arrived at—

Court: Would you want to just tell us, what do you think the consequences of our ruling that their inferior officers will be throughout the rest of the ALJ community?

Counsel: I mean, I can’t tell you what the end consequences will be. I know what the arguments are ….

Court: You don’t have a sense of—what about Free Enterprise? Do you have a view about whether it would—what impact it would have on ALJs who are inferior officers? Would they lose their tenure protection?

Counsel: Your Honor, I don’t want to get out ahead of the solicitor general on these questions. …

And finally this about remedies:

Counsel: Your Honor, I just recently read a law review article that suggested that the answer would be … [that] this court appoint all of the administrative law judges.

Court: I read that too. That’s not—I don’t think that’s going to happen.

Counsel: This is why I’m reluctant to speculate on the remedies if we were unfortunately to lose a series of cases, and we hope that we win this case now so that we don’t at least in the immediate future get to the remedy issue.

I’m curious to see what the Court decides. I also suspect the Justices will read whatever is said very carefully. (For what it is worth, I think this was a very well-argued case; both advocates should be commended — as should the Court. There was a lot of firepower on display.)


The D.C. Circuit decided three cases this week. And one may my favorite opinion of the year — because it is only four pages!

In Environmental Integrity Project v. EPA, Judge Kavanaugh (joined by Judges Ginsburg and Randolph) decided the case in just four pages.* Here is the issue:

Exemption 4 of FOIA authorizes agencies to withhold “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” 5 U.S.C. § 552(b)(4). Section 308 of the Clean Water Act authorizes EPA to obtain records from power plants and states that those records “shall be available to the public” unless EPA determines that the records “would divulge methods or processes entitled to protection as trade secrets.” 33 U.S.C. §§ 1318(a), (b). The problem is that Exemption 4 and Section 308 appear to conflict in certain circumstances. Exemption 4 exempts from disclosure both trade secrets and certain commercial and financial information. Section 308 exempts from disclosure only trade secrets, but it seemingly requires disclosure of commercial and financial information.

And here is the resolution of the issue:

Which statute prevails in that circumstance? The Administrative Procedure Act directly answers that question. Section 559 of Title 5 provides that FOIA exemptions apply unless a later statute expressly supersedes or modifies those exemptions. The statute states: “Subsequent statute may not be held to supersede or modify” the APA, of which FOIA is a part, “except to the extent that it does so expressly.” Id. § 559. Section 308 is the later statute here: Exemption 4 of FOIA was enacted in 1967, while Section 308 was enacted in 1972. Section 308 does not expressly supersede Exemption 4. Therefore, EPA permissibly invoked Exemption 4 to deny the environmental groups’ FOIA request.

(There is a bit more going on in this opinion but that’s the heart of Judge Kavanaugh’s analysis.)

Zuza v. Office of the High Representative is also interesting — and short. Judge Henderson (joined by Judges Tatel and Srinivasan) addressed “a straightforward question: What happens to a pending lawsuit when the defendants establish that they are statutorily immune from ‘legal process’? We conclude that it must cease.” This case concerns the disintegration of Yugoslavia in the 1990s. “A bloody conflict ensued, ending several years later with the 1995 Dayton Peace Agreement (Agreement). The Agreement established Bosnia and Herzegovina as an independent, democratic and multiethnic state with two separate political subdivisions … It also established the Office of the High Representative (OHR), a body charged with overseeing parts of the Agreement’s implementation on behalf of the international community.” Later, “then-High Representative Jeremy Ashdown removed Zoran Zuza from his post in the … government. Ten years later, Zuza sued the OHR, Ashdown and Valentin Inzko, the current High Representative.” Is that okay? Nope: because “legal process” is such a broad phrase, “immunity does not operate only at a lawsuit’s outset; it compels prompt dismissal even when it attaches mid-litigation.”

Finally, we have Baylor v. Mitchell Rubenstein & Associates — which is also interesting, but, alas, quite lengthy. Judge Edwards (joined by Judges Henderson and Sentelle) addressed a host of issues. This will give you a taste:

A number of orders from this “clutter[ed] … docket” are challenged on appeal. Id. First, the parties dispute the District Court’s decision to adopt a Magistrate Judge’s recommendation that Appellant receive approximately twenty percent of the attorney’s fees that she requested. Second, Appellant asserts that the District Court erred in finding that Appellee’s conduct does not fall within the aegis of the CPPA [i.e., the District of Columbia Consumer Protections Procedures Act]. Third, Appellant also contends that the District Court abused its discretion in failing to credit her objections to a different Magistrate Judge’s denial of her Motion to Compel the disclosure of communications between Appellee and an agent of Appellant’s creditor on the grounds that these documents were protected by attorney-client privilege. Appellant additionally disputes the District Court’s refusal to award her attorney’s fees for her efforts in litigating this issue. Finally, Appellant argues that the District Court improperly granted Appellee’s Motion for Summary Judgment on her DCDCL claims [i.e., District of Columbia Debt Collection Law]. On this last point, Appellant contends that the District Court failed to appropriately account for evidence demonstrating that Appellee had “willfully violated” the DCDCL and was therefore subject to liability under the statute.

We do not reach the question of whether the District Court abused its discretion in awarding Appellant only a percentage of the attorney’s fees she sought in connection with her FDCPA claim. In addressing this issue, the District Court relied on the standard set forth in Local Civil Rule 72.2 in finding that the Magistrate Judge’s proposed disposition was not “clearly erroneous or contrary to law.” This was error. Federal Rules of Civil Procedure 54(d)(2)(D) and 72(b)(3) foreclose the District Court from using a “clearly erroneous or contrary to law” standard when evaluating a Magistrate Judge’s proposed disposition of a fee request. The correct standard of review is de novo.

Judge Henderson concurred:

Radi Dennis, counsel for plaintiff Demetra Baylor, made what I consider a grossly excessive fee request. In Baylor’s name, Dennis sought a total of $221,155 for her work on Baylor’s $1,001 settlement and on the fee request itself. The $221,155 demand was more than five times the $41,990 that a magistrate judge determined to be reasonable. Reviewing for clear error, the district court overruled objections from both sides and awarded Baylor $41,990. The Court today holds, and I agree, that a remand is in order because the district court erred by not reviewing the magistrate’s recommendation de novo. The Court is careful not to dictate the outcome on remand, and rightly so because of the district court’s discretion in fee matters, Copeland v. Marshall, 641 F.2d 880, 901 (D.C. Cir. 1980) (en banc). I write separately only because, on reviewing the fee order, I am uncertain whether the district court recognizes just how broad its discretion is. On the extreme facts of this case—and because Dennis is a repeat offender, see Jones v. Dufek, 830 F.3d 523, 529 & n.6 (D.C. Cir. 2016) (affirming denial of excessive fee request Dennis made on behalf of another client)—I believe the court’s discretion includes awarding a fee substantially below an otherwise reasonable one.

And that’s the week.

* I’ve mentioned before that if there is a short opinion in the D.C. Circuit, there is a pretty good chance that Judge Kavanaugh wrote it. A short opinion can be powerful.

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